This series has dealt with starting and building an appraisal business. We've discussed how to measure your hourly income, considered marketing, and discussed a business start up model that can be used by any business to quickly and accurately analyze your cost and then develop a pricing structure, depending on what phase of the business growth cycle you are in. Hopefully you've used all of those tools and suggestions to analyze your situation and consider a plan.
Today we are going to discuss how to build a team in your business to allow growth, and eventually to allow you as the owner more free time to devote to your other interests, be they business or personal.
Building a business that is less dependent on your constant presence requires a long term plan and discipline on a daily basis to make the decisions that foster that objective.
Before I launch into the things I believe are necessary to achieve that end, I want to first emphasize that it is not the only way to have a successful business. It's just one way. Remember my stew analogy; the impossibly complex list of ingredients that make a good stew are often augmented by what is available. If an ingredient is not present, it doesn't mean the business can't be successful. It just means a different path to success will be taken.
My view of a business is as a living organism. I really see it that way. Something that we mold with long term objectives and daily decisions and actions that support the long term goals. That's what really sets me off on the quest each day....it's a creative process.
Click below to read on . . . .
My view of raising children is exactly the same. I have two sons, 40 and 29 years old now. We have four grandchildren and one on the way. My wife and I raised the sons with the conscious attempt to mold them into mature responsible adults that were independent and could make their own decisions. We encouraged them to make decisions at an early age and learn the consequences of those decisions. We did that in controlled circumstances, allowing the independence and decision making in areas that they had sufficient experience in and in which the consequences were appropriate for their age and maturity. For example, we wouldn't allow a 3 year old the independence to decide to cross a street, but we might allow them to choose which toy they wanted at the store, or what fruit drink they preferred.
Both sons are married now, one with four children, the other a happy couple expecting their first child. Neither son needs our guidance any longer. We consider our main objectives in raising them to be successful. We see responsible and independent adults who formerly were our children.
If you have a family, consider the process of raising children, the daily decisions you must make to achieve the long run objective for them, whatever that objective might be. That's the process that goes into building a business. The same process.
With that lengthy background...I apologize...I do suffer from rampant, unruly fingers.....I'll tell you what I do/did. Not what you should do...decidedly not what you should do....just what I do....think back to the stew....I can't know your situation as well as you, and I can't make decisions for you.
Six years ago my business was vastly different than it is today. Deliberately reduced to a one man operation, no assistant. Planned to stay that way till I died. Mark, our now Senior Bright Horse, graduated from undergraduate school and approached me to join the business and expand it to be a regional force. Once I became convinced of his commitment, I agreed.
Mark had targeted two of his friends to join him in the business as equal partners. Both were long time friends of his, also degreed from different universities. I told Mark that I would train him, and the other two as they came on board. They would start out as admin assistants to Acorn for 3 months at an hourly rate. They'd learn the admin effort well that way, and know what it took to make the Admin area efficient when they became appraisers.
While they were admin assistants, I'd use that greater efficiency and capacity to encourage our clients to expand their volume to us, build that volume and then it would be there when the admin assistant was ready to start appraisal training....I had told our clients what our plans were, and they were supportive.
We brought each of the three in that way, one at a time, over an 18 month period. I spent 50+ hour weeks visiting properties, training, etc for over two years. Once the first trainee license was received I stopped doing any appraisals that did not require my personal attention. Every order that came in was handled from start to finish by the guys, with me looking over their shoulders all the way....I could have done each of those appraisals in half the time I spent supervising and teaching, but this way they got the best practical education as quickly as possible.
The agreement we made was that the company would train, pay all license fees, all course costs, all Appraisal Institute membership costs for the guys as they worked toward their AI designations. Once the designation was received, I'd gift them with an equal share of the stock in my S Corp, with voting rights, etc. In return I'd continue to receive an income from the company as long as either my wife or I were living, our stock going to Mark when we died.
The business has continued to expand since that first commitment, averaging a 45% simple annual growth rate, 65% this past year. As we expanded we added the Administrative Manager, then another appraiser, then an administrative assistant last January to go the trainee route, an experienced staff appraiser in May, a full time Admin Assistant in June etc. etc. We now have nine employees.
All full time administrative staff are paid a competitive salary for our market, and receive a monthly incentive bonus for scaled volume achievement. The bonus runs between 25 and 35 percent of salary depending on the volume reached each month. The appraisers are paid on fee split arrangement, starting at 25% for the first 75 assignments (as a trainee), then 30% until they get their residential license, then 35% until they get their certified residential license, and so on with a max of 45-50% split. The company pays a review split on each person needing review (until certified residential is achieved) the review percentage is calculated at 50% minus the appraisers split. All are considered employees, not contractors. We pay each week based on the assignments completed the week before. It is the company's responsibility to collect the receivables.
The company provides all equipment, all office space, all computers, a group health insurance plan which the company contributes 30% for each employee, and the company pays 100% of the cost of disability and life insurance for each full time employee. We have no non compete agreements. We are working to set up a 401K type matching funds plan for the team.
I tell you all of this so that you can see the real commitment we have made to create an environment that is equal to or better than the folks could get in other employment opportunities, and encourages their help in seeing the company grow and prosper. We didn't do all of this at once...remember we started out from a one man shop level....but we knew the pieces we had to put in place, and as the business grows we continue to add those things that we can afford as part of an over all plan.
Now, on to the tough stuff....the intangibles and how they play a part in the success of our model, to the extent it does and will succeed.
The equal to or better opportunity creates self respect and self confidence. Guys and gals visit with their peers. They talk smack. We want our guys and gals to win those smack talks. The self respect and self confidence from those comparisons gives them the foundation for growth in our business. They are confident and appreciative, willing to go the extra mile and take risks. Without that, they would just be employees. You can't achieve that by paying low wages.
I am a good mentor and a master delegator. I teach through practical experience, and review the lessons learned.
I let my staff make mistakes, even ones that I know they are going to make, even ones that I know are going to cost us money. They learn from those mistakes more than they could from me telling them what to do or not do.
I review those decisions and the results, not to reprimand, but as learning tools, and I encourage them to continue to make decisions.
I am quick and frank and direct to point out deficiencies in their individual performance as it relates to their experience level and my expectations. They might say brutally frank. There is no hidden agenda. They know I love each of them and want them to succeed. I think it important to break through their protective shields to get them to realize things that need to change.
After the basic training is complete, both my personal training and the formal classroom training, I leave them alone. I do not accompany them, I do not look over their shoulder, I am not physically present. I don't have an office at their office. There is certainly risk there...mistakes are and will be made. But those innumerable daily decisions that must be made are theirs to make...they have the necessary tools to make them...and right or wrong they know that I'll back them. They each are officers in our company and their word is the company's word. That's true delegation!
I keep a cell phone with me at all times...they can call at any time for advice...but it rarely rings these days.
I create our public image emphasizing the team, not me. I mention me so that those who care will know a gray beard is in the mix, but only for that reason.
It is young, bright, energetic folks who make up the company, not older, wiser, but tired folks like myself.
Finally, we have a plan. Not detailed, because details change. But a plan.
After six years, we have a business with nine employees currently and are looking to add a few more. We are currently embarking on a major expansion of our operation. Everyone is earning more than their peers. I'm working less than 4 hours a day. We have two certified general licensees, and the rest able to sit for that license sometime this year. One has passed the comprehensive exam for the MAI and will hopefully submit his demo and experience in 2007. The others are a couple of years behind that schedule.
Six years ago the business was worth nothing on the open market. It was me. If I left there was nothing left. Today I'd estimate if I were to sell it, it would bring between $700,000 to $1 million. (I'm a former business broker and business appraiser. I know those street values.) However, I'd need about $2 million in earning assets to achieve the income that the business now provides my wife and I, and will provide until we die.
Of course, it's not for sale. That's not the plan.
I see no reason that you can't achieve similar results. It just takes a plan.
The author is the owner of Acorn Appraisal Associates, a 20 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA
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